Securian

When one of my friends recently told me her nephew who’s in his mid-20s was temporarily moving with his girlfriend to her parents’ home to save money and pay down their student loans, I had flashbacks of my own family doing the same through several generations. My brother temporarily moved back to my parents’ house with his very pregnant wife and very large dog back in the late ‘80s, and my parents did the same when they were new parents.

In order to give my friend some unsolicited (!) advice for her nephew, I called my mom to ask what their financial arrangements were way back when. Turns out both my brother and parents were freeloaders! All kidding aside, my parents did not pay rent to my grandparents and, in turn, my parents gifted rent-free accommodations to my brother and sister-in-law.

Need help navigating the recent guidance by the NCUA on MFOELs, MFLs, and all things lending?

Not since I took a recent trip to the Boundary Waters Canoe Area Wilderness along the Minnesota-Canadian border have I needed so much gear to navigate my course. Summer gear for daytime, winter gear for nighttime, freeze-dried stew and, of course, a canoe. All crucial to surviving four days of nothing but lakes, trees, bears and moose. Luckily, however, with the right planning, even the wilderness can be quite tranquil.

If you are a credit union that has relied on Multi-Featured Open-end Lending Plans (MFOELs) in the past, and you want to underwrite your loans, you have a decision to make: move to a Multi-Featured Blended Plan (MFL), or start using closed-end notes. But if you are hearing conflicting accounts of the NCUA guidance, you may be feeling like the bear got your food, and you lost the oars to your canoe.

In order to offer members all the great solutions that your credit union does, it’s likely that you’ve found it beneficial to rely on third-party providers. Oftentimes, agreements with these vendors automatically roll over when they are up for renewal as a matter of course. One reason is that it can be challenging to perform an in-depth review, especially in complicated areas like insurance. However, taking the time to analyze the vendors your credit union works with ensures that their solutions are providing members with what they need, as well as delivering value and revenue to your credit union.

Where do you start with this evaluation? When it comes to insurance, a good place to begin your evaluation is with ratings. We look at ratings for a lot of things in life—fine wines, TV shows, movies—why not use them to help evaluate your vendors? Allow me to provide an example. In a recent podcast that we did with Securian Financial Group, we delved into the importance of ratings when choosing or re-evaluating insurance providers. The financial condition of many insurance providers is evaluated by up to 4 major ratings agencies (Moody’s, Standard & Poor’s, Fitch and A.M. Best). Each of the ratings agencies look at several different factors—from assets and liquidity, to capital, to how risk is managed, and many others.

We can debate which rating agency offers the best analysis, but looking at all of them gives you a good idea of the company’s background and financial stability. This is critical to determining long-term value—which is what you both want and need in an insurance provider. Cost and revenue aside, the one thing that is non-negotiable in an insurance provider is financial stability. Without that, all you have are empty promises.

Next, you want to look at how the vendor is meeting your needs. Ask the right questions: Is this solution satisfactory? Is this solution really doing everything you intended it to? Is the solution yielding all the revenue promised or that is possible? And maybe most importantly, is there someone else offering this solution that can do better?

There are always changes in the industry and constant improvements are a part of that. It’s critical that your third-party providers are keeping up. Of course, cost and revenue factor into this as well. Is this vendor providing you the best value, and/or the most revenue? Could you be using another provider that would cost the credit union less or yield greater revenue without sacrificing quality and long term value?

So, before you renew that Agreement, pencil in some time to evaluate that vendor, using these and other tips outlined in the podcast. You may be surprised at what you find.